INTRODUCTION TO THE TOPIC

ONLINE TRADING Online trading can be described in simple words as the internet based investment activity that involves no direct involvement of the broker. There are many leading online trading portals in India along with the online trading platforms of the biggest stock houses like the National stock exchange and the Bombay stock exchange. The total portion of online share trading India has been found to have grown from just 3 per cent of the total turnover in 200304 to 16 per cent in 2006-07.

Traditionally stock trading is done through stock brokers, personally or through telephones. As number of people trading in stock market increase enormously in last few years, some issues like location constrains, busy phone lines, miss communication etc start growing in stock broker offices. Information technology (Stock Market Software) helps stock brokers in solving these problems with Online Stock Trading. Online trading, or direct access trading (DAT), of financial instruments has become very popular in the last five years or so. Now almost all financial instruments are available to trade online including stocks, bonds, futures, options, ETFs, forex currencies and mutual funds.

Online trading differs in many things from traditional trading practices and different strategies are needed for profiting from the market. In traditional trading, trades are executed through a broker via phone or via any other communicating method. The broker assist the trader in the whole trading process; and collect and use information for making better trading decisions. The whole process is usually very slow, taking hours to execute a single trade. Long-term investors who do lesser number of trades are the main beneficiaries. In online trading, trades are executed through an online trading platform (trading software) provided by the online broker. The broker, through their platform offers the trader access to market data, news, charts and alerts. Day traders who want real-time market data are provided level 1.5, level 2 or level 3 market accesses. All trading decisions are made by the trader himself with regard to the market information he has. Often traders can trade more than one product, one
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market and/or one ECN with his single account and software. All trades are executed in (near) real-time. In return of their services online brokers charge trading commissions (which is often very low - discount commission schedules) and software usage fees. The investor has to register with an online trading portal and get into an agreement with the firm to trade in different securities following the terms and conditions listed down on the agreement. The order processing is done in correct timings as the servers of the online trading portal are connected to the stock exchanges and designated banks all round the clock. They can also get updates on the trading and check the current status of their orders either through e-mail or through the interface. Brokerages also provides research content on their websites, such that the clients can take their own decisions on stocks before investing.

The onset of online trading changed the traditional value proposition of trading, allowing online brokers to supply investors with rich, interactive information in real time including market updates, investment research and robust analytics. The result is an integrated trading experience that combines execution with interactive analysis shown by the growth of the online customer community from a mere 23000 average trades on NSE per day in a year 2000 to over 52000 average trades in 2002.

In spite of many private stock houses at present involved in online trading in India, the NSE and BSE are among the largest exchanges. They handle huge daily trading volumes, supporting large amounts of data traffic, and possessing a countrywide network. The automated online systems used for trading by the national stock exchange and the Bombay stock exchange are the NIBIS or NSE's Internet Based Information System and NEAT for the national stock exchange and the BSE Online Trading system or BOLT for the Bombay stock exchange. Although the information technology revolution has reduced distances and created a global village, only a few, isolated pockets in India are privy to these facilities and the inherent advantages that stem from the Net. And yet, for the business savvy stockbroker, these isolated IT villages have thrown up tremendous opportunities. With just two technologies to choose from, Internet-based stock trading is still in its infancy in the country. Thus, there is limited choice for early entrants NSE.IT and Financial Technologies. These technologies offer front-end trading software, by providing the investor with a trading
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platform. For the broker, they act as an interface between the stock exchange, the bank and the depository participant (DP) for executing banking and securities transactions.

The essential component of Internet based trading is the interface between broker, bank and DP. A broker-bank-DP is the best combination to begin Internet trading, but experience has shown that it is not mandatory that all three are in position before Internet-based trading commences. As Internet trading becomes a reality, the interface will develop with enquiries from interested parties. Here, ICICI, with its bank, stock-broking unit and DP, has a distinct advantage. However, early players are not likely to face a shortage of suitors in the form of banks and DPs. Later, as competition heats up and the market gets crowded, only the major players are likely to survive. The entry of ICICI has also tested available financial technologies and found the broker-banker-DP interface to be efficient. With this interface, the broker can control the exposure of the client on a real-time basis and also fix advance exposure limits on the basis of the deposit with the broker or on the basis of the brokers own credit assessment of the client. In the perspective of overall risk management of the Net broker, the system provides a flawless control mechanism which, in any case, is essential when dealing with faceless customers. In fact, trading is only a logical extension of the computer-to-computer link allowed by the NSE, and hence the broker will be in a position to provide value additions, either on his own or through the software vendor. Advantages to clients traditionally, investors have been doing stock transactions with their broker either by placing orders on the phone or by visiting the brokers offices. During times of heightened market activity, investors find it difficult to get the broker on telephone or fax. Even if the client goes to the brokers office, the attention he gets on a busy day is based on the size of his order, often resulting in frustration, arguments and disputes. For Geojit, the biggest motivation to enter Net-based trading bandwagon was this situation. Even after installing 25 telephone lines in the companys Cochin office, clients still complained that they did not get through. The retail broking business is a mass business activity and a broking company cannot afford to have dissatisfied clients. Internet trading is the only solution to this problem and investors will have the facility to trade as and when they want, provided they have a Net connection. Soon there will be a differential brokerage system, and clients who trade through the Net will be able to do it with a lower transaction cost compared to traditional brokers. This trading system helps the broker to expand his business. Traditionally, brokers were
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hesitant to expand in a big way as there were problems in dealing with unknown clients. In this system, security features can be built in, with the broker himself providing the degree of safety he requires. Without much capital investment, the broker will be able to enlarge his client base. With just one office in the metro, the broker will be able to do business with many times the number of existing clients. Major issues Internet-based trading, to become really popular, should have both seamless trading and seamless settlement, whereas now only the former is possible. This prevents the Internet broking community from announcing largescale reductions in brokerage. Ease of trading and settlement along with reduction in transaction costs is what investors look for in the new system. Hence, bankers and DPs will have to change their systems to enable seamless settlements. At present, when the client pays an advance deposit, the broker fixes the exposure limit, and if there is a sudden fluctuation in the share price, the client is not able to trade unless funds move to the broker physically. This process takes a minimum of two days, by which time the price would have changed. The ideal situation is where the client is able to trade on the basis of his deposit in the bank, which will be accessible to the broker through networking. Another serious issue is the efficiency of the Internet infrastructure in the country, which affects the speed of execution. During the day, traffic is so great that either the line is not available or it is frustratingly slow, defeating the very purpose of Net-based trading. In short, seamless settlement of Net transactions and improvement of the Internet infrastructure are of vital importance for exponential growth of Internet-based trading.

The advent of Internet-based trading in the country will change the face of the Indian capital market very soon in terms of the volume of transactions, the nature and settlement of trade, and the profile of market participants. Soon, Internet brokers will announce a flat rate per transaction instead of the present system of calculating brokerage as a percentage of the value. If the system enables the Internet broker to have seamless trading and settlement through the network, there is no cost differential between a trade of Rs 50 lakh and a trade of Rs 5. The broker will straightaway announce his per-trade brokerage in absolute numbers. When this happens, it will be a rude shock to the broking community unless it changes very fast. Today, as per NSDL statistics, we have only 2.4 million investors with demat accounts in the country. Considering various investor combinations that are holding accounts, we can presume the country has roughly 5-7.5 lakh active investors now. This figure is unbelievably
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small compared to the potential number of investors, which is anything between 200 million and 250 million. When we take into consideration the way transaction risk and cost in the Indian capital market is coming down, there will be a massive surge in the number of investors and also in volumes. The only way to manage this kind of potential growth is to adopt state-of-the-art trading techniques. The growth of Internet-based trading as a mass trading technique in the country is unstoppable, going by the indicators available and the signals for the future. When it ultimately gathers momentum, the biggest beneficiary will be the investor, who will be able to trade with greater speed and transparency, and at lower costs.

There are two different types of trading environments available for online equity trading:

a) Installable software based Stock Trading Terminals This trading environment requires software to be installed on investors computer. This software is provided by the stock broker. This software requires high speed internet connection. These kind of trading terminals are used by high volume intraday equity traders.

Advantages: i) Orders directly send to stock exchanges rather than stock broker. This makes order execution very fast. ii) It provides all the information which is required to a trader on a single screen including stock market charts, live data, alerts, stock market news etc.

Disadvantages: i) Location constraint is there as one cannot trade if one is not on the computer where he has installed trading terminal software.
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ii) It requires high speed internet connection. iii) These trading terminals are not easily available for low volume share traders.

b) Web (Internet) based trading application This kind of trading environment doesn't require any additional software installation. They are like other internet websites which investor can access from around the world through normal internet connection.

Advantages of Online Stock Trading (Website based):

i) Real time stock trading without calling or visiting broker's office. ii) Display real time market watch, historical data, graphs etc. iii) Investment in IPOs, Mutual Funds and Bonds. iv) Check the trading history; demat account balance and bank account balance at any time. v) Provide online tools like market watch, graphs and recommendations to do analysis of stocks. vi) Place offline orders for buying or selling stocks. vii) Customers can modify the placing orders according to the market movements. viii) Set alert to inform you certain activity on the stock through email or SMS. ix) Customer service through Email or Chat. x) Secure transactions.

Disadvantages of Online Stock Trading (Website based): i) Website performance - sometime the website is too slow or not enough user friendly. ii) In online terminal, investor cant get customized expert advice, whereas in offline the broker gives suggestions according to investors strategy (i.e. short term or long-term) iii) Transactional errors due to technical problems.

Major Players in Online Trading Brokerage Houses in India 1) Kotak Securities Ltd. 2) ICICI Securities Ltd. 3) Motilal Oswal Securities 4) Religare Securities Ltd. 5) IL&FS investmart Limited 6) SSKI Ltd. 7) India bulls Financial Services Limited 8) India Infoline 9) HDFC Securities 10) Geojit securities

VALUE ADDED SERVICES:

(A) Trading in shares

i) Spot Trading When an investor is looking at an immediate liquidity option. Cash on spot, money is credited to his bank a/c the same evening and not on the exchange pay-out date. This money can then be withdrawn from any of bank ATMs.

ii) BTST Buy today and sell tomorrow is a facility that allows investor to sell shares even one day after the buy order date ,without investor having to wait for the receipt of shares into his demat a/c.

iii) Trading on NSE/BSE: Through some of the service providers, we can trade on both NSE and BSE

iv) Margin Trading Investor can trade an intra-settlement trading up to 4 times of the investors available funds, wherein investor take long buy/short sell positions in stocks with the intention of squaring off the position within the same settlement cycle.

(B) Investing in Mutual funds: Some of the major service providers bring the same convenience while investing in Mutual Funds as well as Hassle free and paperless investing. Once the investor place a request for investing in a particular fund, there are no manual process involved .Investors funds are automatically debited or credited while simultaneously crediting or debiting investors unit holdings.

(C) Derivatives a) Futures: Through online trading service providers, one can trade in index and stock futures on the NSE. In futures trading, investor takes buy/sell positions in index or stocks contracts having a long contract period of up to 3 months. b) Options: Through online trading service providers, one can trade in index and stock options.

(D) IPOs Online Investors could also invest in Initial Public Offers (IPOs) online without going through the hassles of filling any application form/paperwork. They can get in-depth analysis of new IPOs issues (Initial Public Offerings) that are likely to hit the market and analysis on these. IPO calendar, recent IPO listings, prospectus/offer documents, and IPO analysis are also provided.

(E) Other services Displaying indices of major world markets, nifty futures, daily share prices of all scrips, monthly and yearly highs/lows of share prices are listed, technical charts of intraday and EOD (End of Day) are also provided. Company profiles, breaking news and snapshots of latest developments in the market are displayed in the website. The major internet service trading providers in the Indian markets are Religare, HDFC, ICICIdirect, Share khan and India bulls. The major comparative analysis parameters taken by customers are a/c opening charges, brokerage and annual charges.

ONLINE TRADING INDIAN SCENARIO In the Indian context, online trading can be rightly called as a recent phenomenon, which took root with the change of century i.e. April 2000, and even till day online trading is not much popular among investors for which a list of factors can be blamed. This fact is more clear from the information available that where number of stocks exchanges in India has grown from 7 exchanges in 1946 to total 23 exchanges till 2005, only 2 stock exchanges are providing online share trading. Indian stock exchanges have started adopting technology because it provides the necessary impetus for the organization to retain its competitive edge and ensure timeliness and satisfaction in customer service.

Chart 1: Market shares of major players in Online trading business in India

Market share in Online Trading

Others 24% ICICIdirect ICICIdirect 50% India Bulls 26% India Bulls Others

www.investopedia.com

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Though the Indian brokerage industry has been consolidating steadily over the last 10 years, the share of the top 10 brokers has risen to only around one-fourth of the total industry revenues. In this fragmented market, leading players like ICICI Direct, Kotak Securities, Indiabulls, Sharekhan, and 5 Paisa, apart from many small players, compete on the basis of low brokerage fees and customer service.

Buoyed by the bullish Indian stock market, foreign banks such as Socit Gnrale (SocGen), BNP Paribas, Standard Chartered, and Macquarie Bank (Australia) are eyeing stakes in Indian retail brokerages. The major growth drivers of the Indian retail brokerage industry are the increasing appetite for equities among investors as an asset class, the convenience of online trading, and declining brokerage fees.

Online trading has gained momentum from just 0.5% of total traded volumes 5 Yrs back, which now account for 5% of total trading volume of approximately Rs 14000 Cr. On OnceOver the years, the value of all trades executed through internet on NSE has grown from less than Rs 100 Cr in June 2003 to over Rs 700 Cr in June 2005. Online trading is growing by 150 % per annum. Now NSE has 108 registered brokers and 1.053 million internet trading subscribers. However mainly 5 companies control 90 % of the market in Internet trading. ICICIdirect.com has around 50 % market share ,whereas India Bulls hold 26% share ,other dominant players are Kotak securities and Share Khan. ICICI has been able to gain its dominant presence in Internet trading because they have strong connectivity of stock trading, demat account, bank account, etc. ICICI Direct has recorded 6, 75,000 registered customers and has become 10th largest online broker in US whereas share khan and 5paisa are losing their way.

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INTRODUCTION TO THE INDUSTRY

Indias capital market has undergone sea changes in the pre liberalization era. We have witnessed the sensex reach astonishing highs such as the 21000 mark. Also in the wake of the global economic crisis the sensex was hammered to the 8000 9000 levels. Many experts around the globe believe that the stock market is one of the most efficient ways to judge the strength or weakness of an economy. The stock markets also provide investors some of the highest return on investments when compared to other forms of investments. In recent years the Indian economy has surged ahead in break neck pace clocking 7 8% GDP growth numbers. With this astonishing growth in the economy the number of investors in various financial instruments has also increased and so has the demand for timely and accurate information. The Indian markets have become more complex and more intertwined with the global economy. This creates a further need for timely information to which the investors in India can react appropriately. For this purpose investors seek out professional opinion from various sources such as brokerages. But, India being a country in which small retail investors form the major chunk of the investment community often it is not possible for them to hire top class professional services and end up investing blindly on the advice of their agents. A new breed of companies are now emerging who are seeking to turn around this situation by taking part in a new revolution which is not only engulfing India but also all countries around the world. It is the broadband revolution. Although the developed countries already boasts extensive broadband connectivity, the emerging countries and the under developed countries still have a lot of improvements to undergo in terms of broadband infrastructure. As the broadband network grows the number of people having access to information is also gaining. In a recent survey by Google India it was revealed that 84% of the people with access to the internet purchase various financial products partly based on the online information that is available. This further highlight the need for more accurate and timely information is made available to potential investors. New web based companies such as moneycontrol.com, rediff.com, guruji.com and others are emerging as key players in this fast growing industry

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Coming to the history of the capital market in India dates back to the eighteenth century when East India Company securities were traded in the country. Until the end of the nineteenth century securities trading was unorganized and the main trading centres were Bombay (now Mumbai) and Calcutta (now Kolkata). Of the two, Bombay was the chief trading centre wherein bank shares were the major trading stock During the American Civil War (1860-61). Bombay was an important source of supply for cotton. Hence, trading activities flourished during the period, resulting in a boom in share prices. This boom, the first in the history of the Indian capital market lasted for a half a decade. The bubble burst on July 1, 1865 when there was tremendous slump in share prices. Trading was at that time limited to a dozen brokers; their trading place was under a banyan tree in front of the Town hall in Bombay. These stock brokers organized informal association in 1897 Native Shares and Stock Brokers Association, Bombay. The Stock exchanges in Calcutta ad Ahmedabad also industrial and trading centres came up later. The Bombay Stock Exchange was recognized in May 1927 under the Bombay Securities Contracts Control Act, 1925. The capital market was not well organized and developed during the British rule because the British government was not interested in the economic growth of the country. As a result many foreign companies depended on the London capital market for funds rather than in the Indian capital market.

In the post independence period also, the size the capital market remained small. During the first and second five year plans, the governments emphasis was on the development of the agricultural sector and public sector undertakings. The public sector undertakings were healthier than the private undertakings in terms of paid up capital but shares were not listed on the stock exchanges. Moreover, the Controller of Capital Issues (CI) closely supervised and controlled the timing, composition; interest rates pricing allotment and floatation consist of new issues. These strict regulations de-motivated many companies from going public for almost four and a half decades.

In the 1950s, Century textiles, Tata Steel, Bombay Dyeing, National Rayon, Kohinoor mills were the favourite scripts of speculators. As speculation became rampant, the stock market came to be known as Satta Bazaar. Despite speculation non-payment or defaults were very frequent. The government enacted the Securities Contracts (regulation) Act in 1956 to
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regulate stock markets. The Companies Act, 1956 was also enacted. The decade of the 1950s was also characterized by the establishment of a network for the development of financial institutions and state financial corporations.

The 1960s was characterized by the wars and droughts in the country which led bearish trends. These trends were aggravated by the ban in 1969 on forward trading and Badla technically called contracts for clearing Badla provided a mechanism for carrying forward positions as well as for borrowing funds. Financial institutions such as LIC and GIC helped to revive the sentiment by emerging as the most important group of investors. The first mutual fund of India, the Unit Trust of India (UTI) came into existence in 1964.

In the 1970s Badla trading was resumed under the disguised forms of hand delivery contracts A group. This revived the market. However, the capital market received another severe setback on July 6, 1974, when the government promulgated the Dividend Restriction ordinance, restricting the payment of dividend by companies to 12 per cent of the face value or one-third of the profit of the companies that can be distributed as computed under section 369 of the Companies Act, whichever was lower. This lead to a slump in market capitalism at the BSE by about 20 per cent overnight and the stock market did not open for nearly a fortnight. Later came buoyancy in the stock markets when the multinational companies (MNCs) were forced to dilute their majority stocks in their Indian ventures in favor of the Indian public under FERA 1973. Several MNCs opted out of India. One hundred and twenty three MNCs offered shares worth Rs 150 crore, creating 1.8 million shareholders within four years. The offer prices of FERA shares were lower than their intrinsic worth. Hence, for the first the FERA dilution created an equity cult in India. It was the spate of FERA issues that gave a real fillip to the Indian stock markets. For the first time, many investors got an opportunity to invest in the stocks of such MNCs as Colagte and Hindustan Liver Limited. Then in 1977, a little known entrepreneur, Dhirubhai Ambani tapped the capital market. The scrip Reliance Textiles is still a hot favorite and dominates trading at all stock exchanges. Indias capital markets have experienced sweeping changes since the beginning of the last decade. Its market infrastructure has advanced while corporate governance has progressed faster than in many other emerging market economies. But in contrast to several developed
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countries and Asian economies, Indias capital markets are still shallow, implying that further reforms are needed to make India a world-class financial centre. At nearly 40% of GDP, the size of Indias government bond segment is comparable to many other emerging market economies. Its corporate bond market, however, remains small and is dwarfed by those of the United States, South Korea and Malaysia. India boasts a dynamic equity market. The sharp rise in Indias stock markets since 2003 reflects its improving macroeconomic fundamentals. However, the large size of insider holdings and the small presence of institutional investors believe these impressive figures. Innovative products such as securitized debt and fund products based on alternative assets are starting to break ground. But an enabling environment is not yet in place and there remains an overriding need to increase domestic investors knowledge regarding the merits and risks of capital market investing. Introduction improving macroeconomic fundamentals, a sizeable skilled labor force and greater integration with the world economy have increased Indias global competitiveness, placing the country on the radar screens of investors the world over. The global ratings agencies Moodys and Fitch have awarded India investment grade ratings, indicating comparatively low sovereign risks. These positive dynamics have led to a sustained surge in Indias equity markets since 2003 (attracting sizeable capital from foreign investors. Net cumulative portfolio flows from 2003-2006 (bonds and equities) amounted to USD 35 bn. Moreover, Indias stock market has outperformed world indices in recent years. And, despite its increasing correlation with world markets in recent years, India still offers diversification in global portfolios.

The bond market is dominated by government bonds. Government bond issuances, resulting from persistently high fiscal deficits, as well as specific regulatory requirements, have underpinned the supply and demand conditions in Indias debt capital markets. Nearly 90% of total domestic bonds outstanding are government issuances (i.e. Treasury bills, notes and bonds), squeezing out corporate and other marketable debt securities. Initiatives to lift the corporate bond market from its nascent stages have been slow to progress, leaving companies unable to realize their optimum capital structure as a result.

And unlike the derivative instruments that are available for equities, those for fixed income instruments (e.g. options in interest rates) in the organized exchanges have failed to take off,
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limiting the price discovery in the secondary markets. Against this backdrop, greater efficiency in financial intermediation is required to support investment and growth, but this will require structural changes in Indias public finances and the dismantling of unwieldy regulations. Capital markets development supported by steady infrastructure reforms Indias financial market began its transformation path in the early 1990s. The banking sector witnessed sweeping changes, including the elimination of interest rate controls, reductions in reserve and liquidity requirements and an overhaul in priority sector lending. Persistent efforts by the Reserve Bank of India (RBI) to put in place effective supervision and prudential norms since then have lifted the country closer to global standards. Around the same time, Indias capital markets also began to stage extensive changes. The Securities and Exchange Board of India (SEBI) was established in 1992 with a mandate to protect investors and usher improvements into the microstructure of capital markets, while the repeal of the Controller of Capital Issues (CCI) in the same year removed the administrative controls over the pricing of new equity issues. Indias financial markets also began to embrace technology. Competition in the markets increased with the establishment of the National Stock Exchange (NSE) in 1994, leading to a significant rise in the volume of transactions and to the emergence of new important instruments in financial intermediation.

Market infrastructure strengthened through innovations

Market infrastructure has strengthened markedly heralded by steady reforms. The seamless move toward shorter settlement periods has been enabled by a number of innovations. The introduction of electronic transfer of securities brought down settlement costs markedly and ushered in greater transparency, while dematerialization instituted a paper-free securities market. Together, these mechanisms eliminated forgery of share certificates. Straight-through processing automated the complete workflow (i.e. front, middle and back office and general ledger) involved in the financial transaction, thus doing away with multiple data re-entry and avoiding delays and errors. On the initiative of the Reserve Bank of India and the cooperation
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of public and private institutions, the Clearing Corporation of India Limited (CCIL) was established in 2001 to facilitate the clearing of trades and transactions in the foreign exchange and fixed income markets, catalyzed by the extensive use of information technology.

Good corporate governance, but overall legal framework needs improving

Continuing efforts by the SEBI to upgrade the corporate governance framework have positioned India at an above-average level against other emerging market economies, according to the Institute of International Finance (IIF), the global association of financial institutions3. Since March 2006, listed companies have been required to submit quarterly compliance reports to the SEBI, facilitating the valuation of companies and bringing it in line with the Sarbanes-Oxley Act. Enforcement remains a challenge due to a still limited number of adequately trained staff to implement the rules. Nor are companies subject to substantial fines or legal sanctions, which reduce their incentives to comply. In turn, this reflects the ongoing gaps in Indias legal system, and somewhat undermines the steps to promote Indias capital markets further. Although India does have a functional legal system, the countrys law enforcement still lags behind the more advanced economies of Hong Kong and Singapore according to the World Bank. This implies that efforts to raise corporate governance need to be accompanied by a stronger legal framework to bring greater stability in its capital markets and foster investor confidence. A sizeable but largely skewed capital market for over a century, Indias capital markets, which consist primarily of debt and equity markets, have increasingly played a significant role in mobilizing funds to meet public and private entities financing requirements. The advent of exchange-traded derivative instruments in 2000, such as options and futures, has enabled investors to better hedge their positions and reduce risks. In total, Indias debt and equity markets were equivalent to 130% of GDP at the end of 2005. This is an impressive stride, coming from just 75% in 1995, suggesting issuers growing confidence in market based financing. However, the size of the countrys capital markets relative to the United States, Malaysias and South Koreas remain low, implying a strong catch-up process for India.

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Types of capital market:

A) The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.

Features of primary markets are:

a) This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM). b) In a primary issue, the securities are issued by the company directly to investors. c) The company receives the money and issues new security certificates to the investors. d) Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. e) The primary market performs the crucial function of facilitating capital formation in the economy. f) The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as going public. g) The financial assets sold can only be redeemed by the original holder.

B) The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stocks, bonds, options, and futures are bought and sold. The term "secondary market" is also used refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a second- or third- market has developed for use in
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ethanol production).With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. The national exchanges - such as the National Stock Exchange and the Bombay stock exchange are secondary markets. After the initial issuance, investors can purchase from other investors in the secondary market.

The secondary market for a variety of assets can vary from fragmented to centralized, and from illiquid to very liquid. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade over the counter, or by phoning the bond desk of ones broker-dealer.

INDIAS PULSATING EQUITY MARKETS The development of Indias equity capital markets has taken a more progressive trajectory than the bond market, largely reflecting the governments laissez faire approach in the segment. At 90% of GDP19, its size is comparable to that of other emerging countries, although is still small relative to many developed markets of Indias 23 stock exchanges, equity trading is most active in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Since the NSEs inception in 1994, it has caught up with the BSE in terms of capitalization but exceeded it in turnover. The BSE boasts of over 4,000 listed companies, surpassing stock exchanges in the US. This explains its slightly higher market capitalization over the NSE, although its lower turnover implies that inefficiencies remain due to the high proportion of untraded companies. Its share of total equity turnover is just 33% compared to 66% of its rival, the NSE. The increase in the limit for foreign direct investment in the stock exchanges to 49% announced early this year is expected to lend more dynamism to the equity capital markets. The investment limit for a single investor was set at 5%. It did not take long after the new limit was announced that the New York Stock Exchange (NYSE), Goldman
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Sachs, General Atlantic and Softbank Asian Infrastructure Fund all acquired a 5% stake in the National Stock Exchange (NSE). Increased foreign presence is expected to help the NSE to inch forward to the global markets, generate a wider customer and investor base and offer more innovative products. The Bombay Stock Exchange is also courting strategic investors. If it succeeds, this should help speed up the process of consolidating the thousands of inactive listed companies on the board. Moreover, the move will enhance its competitive strength against the NSE, which has diminished over the past decade.

Higher volatility

Benchmarking the risk/return characteristics of Indias equity markets against the world average shows that Indias stock market has historically been more volatile while its returns have, until recently, underperformed. This should not come as a surprise as the past decade witnessed several political and economic uncertainties, undermining business and investor confidence. Only from 2006 has Indias stock market begun to outperform the worlds index as momentum to liberalize the economy gathered pace and investors began to take notice. Reflecting the recent sharp run-up in equity prices, Indias stock markets today rank among the most expensive in the world, raising concerns over a correction, especially if earnings disappoint. However, sustained economic growth combined with continued marketfriendly capital market reforms should prove to be supportive factors for superior returns in the medium run. In terms of sector wise composition in benchmark indices, Indias stock market is broad-based, putting it roughly in line with the world index. The higher weight of the IT sector today reflects the countrys increasing turn towards a knowledge-based economy. But this may change, with consumer discretionary and consumer staples projected to get a larger share of the pie in tandem with rising incomes and as household preferences become more discerning. The shares of financials and healthcare sectors are also expected to increase markedly as industry consolidation picks up and the door to foreign direct investment is widened.

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Growing Participation of Foreign Institutional Investors (FIIs) in equity

Reflecting Indias improving macroeconomic fundamentals, increasing corporate profitability and competitiveness, and greater integration with the world economy, foreign institutional investors (FIIs) participation grew steadily over the past 3 years. True, FII invest in local bonds and equity, but their interest has largely been on the latter. The inflow of portfolio capital continues to test new highs and in recent years has outpaced the inflow of foreign direct investment (FDI). Indias accounting standards, although still not in full convergence with international practices, combined with the quarterly reporting frequency mandated by the SEBI on listed companies, offer guidance in corporate valuation. Greater inflows are still to be expected, arising from international investors quest for higher returns and improved portfolio diversification, buttressed by ongoing structural changes in Indias economy and its financial markets. Sustained inflow of capital will not only bring greater liquidity in the market, but foreign presence will encourage further market transparency.

Increasing overseas listing by way of GDR and ADR

Domestic companies, both large- and small-cap, have been allowed to list abroad by way of American Depository Receipts and Global Depository Receipts (ADR, GDR) since 1992. Owing to global and local market conditions (e.g. global liquidity, stock market crashes, economic and financial crises), the amount raised through the ADR route since its inception has been quite volatile. Only in recent years have issuances picked up steadily, with the amount raised in fiscal year 2005/2006 exceeding USD 2.5 billion, a level not seen in over 10 years. As one of the measures to allow greater capital account convertibility, the RBI has allowed two-way flexibility for Indian ADRs/GDRs. This allows holders of the instruments to cancel them with the depository and sell the underlying shares in the market. The company can then issue ADRs anew to the extent of the shares converted into local shares. This was not the case in the last decade, which limited companies ability to access capital abroad.

Scope for improvement

Impressive though the developments may be, Indias stock markets still have some room for improvement. For one, the shareholder pattern needs to be broadened, as ownership is concentrated in the promoters and company insiders show an increasing presence. This
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implies that minority shareholders interest is minimal, which needs to be increased for the sake of improved corporate governance. The presence of institutional investors in the equity market is also low, resulting from the restrictive investment guidelines set by the government for the insurance industry, banks and pension funds. Of note, while only 18% of the listed companies in the NSE are owned by retail investors, they account for an estimated 85% of the trading volume, according to a recent paper by McKinsey. This suggests that retail investors tend to speculate in the stock market rather than follow a strategy of pursuing longterm benefits. Resumption in privatization is also the key to further developing Indias equity markets. Since FY 2003/2004, privatization activities have dwindled, driven in part by the lack of political consensus to keep it on track. The sluggish process prevents publicly owned companies from accessing more efficient sources of funding. It also interferes with their movement toward market-disciplined processes and better corporate governance.

The Capital Market - Future Indias economy is expected to benefit enormously from the process of gradual capital market liberalization. Empirical evidence has shown that emerging market economies that have heralded changes in their financial markets experienced higher growth and investment. Indias regulators have been active in seeking ways to develop the countrys financial markets, and a culture of introducing greater risk management is starting to set in. The main challenge ahead is to strengthen the political will to further ease regulations in the capital markets and the limits prescribed to market participants. India is no exception, with percapita GDP and domestic investment rising post-liberalization. Economies which pursued deeper financial market reforms, and whose per-capita incomes were roughly similar to Indias prior to their liberalization periods, not surprisingly experienced even greater rewards. Drawing from these countries experiences, Indias growth potential can experience a sustained pick-up if it stays on the path of reforming its capital markets. Full capital account convertibility no longer appears to be a pipe dream, going by the RBIs reconsideration of the Tara pore Committees roadmap to capital account liberalisation. Early in 2006, the conditions for full capital account convertibility have been re-examined against issues such as exchange rate management, prudential safeguards to monetary and financial stability and implications of dollarization in India. Although full convertibility is still not expected to occur overnight, the momentum towards that goal seems to have accelerated.
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TITLE OF THE STUDY A study on perception of Equity investors towards online trading in India.

STATEMENT OF PROBLEM

Online trading is becoming quite popular in recent times and being preferred over the traditional offline mode of investment. Although there is a growing popularity of online investment, at the same time there are questions being raised about certain aspects of online trading such as its safety, its convenience, the quality of investment decisions etc. The research has therefore been conducted to study these aspects of online trading among various age groups of investors so as to find out the general perception of people towards online trading in the light of these aspects.

SCOPE OF STUDY The scope of the study enables the study to be delimited from the stand point of manageability.

a) GEOGRAPHICAL SCOPE City of Bangalore

b) THEORETICAL SCOPE The perception of investors towards online trading and the factors that influences such perception keeping age as the independent variable and the safety, convenience and investment decision as dependent.

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OBJECTIVES OF THE STUDY The objectives of the study are: 1) To study investors perception towards online trading in terms of age, safety, convenience and investment decisions. 2) To analyze the inter relationship between Age and safety, convenience and investment decisions. 3) To study the merits and demerits of online trading. 4) To identify innovative value added services 5) To study the online equity trading market in India.

TYPE OF RESEARCH

Since the study aims at testing hypothesis and specifying and interpreting relationships, it is an analytical type of research. It concentrates on analyzing data in depth and examining association between factors.

METHODOLOGY DATA SAMPLING Since the sample group is small and heterogeneous in nature and also statistical tools are to be used, Stratified Random Sampling is best suited. Stratified Random Sampling is one amongst the most elementary random sampling techniques. A stratified random sampling is a method that allows each possible sample to have an equal probability of being picked and each item or individual in the entire population have an equal chance of being included in the sample. For this project work, without replacement sampling method is used. It means that a person or item once selected is not

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returned to the frame and therefore cannot be selected again. This selection process continues until the desired sample size n is obtained.

SAMPLING DETAILS Sample unit The sample unit of the research is that of the population, that is respondents who invest in equity shares.

Sample size Out of the total population of equity investors in Bangalore, 75 respondents have been taken as the sample size.

DATA COLLECTION METHODS For this study, the data are collected from two types of sources, Viz. Primary data and Secondary data.

Primary Data

Primary data is gathered from direct observation or data personally collected. It refers to that data which is collected for a specific purpose from the field of enquiry, and are thus original in nature. It is the data that is accessed for the first time and full control is provided in working with primary data. For the project, primary data were collected mainly through Survey Method, using the tool questionnaire. While administering the questionnaires, the objectives of the study and the method of filling the questionnaire had been explained to the respondents personally. Necessary clarifications have been given for the terminology used in the questionnaire.

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Secondary Data

Secondary data are those, which have been already collected by others for a specific purpose and are subsequently used for applications in different conditions. It is the second-hand information about an event that has not been personally witnessed by the researcher. The use of secondary data saves time and money. Here the secondary data were obtained from: a) Various text books, registers etc. b) Websites of the organization as well as others like nseindia.com and moneycontrol.com. The purpose of using the secondary data is to increase the accuracy of analysis.

TOOLS FOR DATA COLLECTION

QUESTIONNAIRE For this project work, data is collected from respondents using the questionnaires. In a statistical enquiry the requisite information is often collected through a printed Performa in the form of a questionnaire. This sheet contains a series of question, which the investigators are supposed to ask the informant and the informants are supposed to write answers against each individual question. It is prepared in such a way that the respondents can easily answer it. For this project, there were 18 closed ended questions and 1 open ended question, which are related to the Perception of equity investors towards online trading in India.

TOOLS FOR DATA ANALYSIS It was stated before that making mistakes in analytical work is unavoidable. This is the reason why a complex system of precautions to prevent errors and traps to detect them has to be set up. An important aspect of the quality control is the detection of both random and systematic errors. For the detection itself as well as for the quantification of the errors, statistical treatment of data is indispensable. A multitude of different statistical tools is available, some of them simple, some complicated, and often very specific for certain purposes. Fortunately,
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with a few simple convenient statistical tools most of the information needed in regular research work can be obtained: the "t-test, the "F-test", correlation and regression analysis.

ANALYTICAL TOOL After the collection of the data each sample question is coded and tabulated and then subjected to analysis. The data obtained are analyzed using the following tools

Percentage (%) The percentage of respondents coming under the same category was found out and it helped to know the response of the investors more clearly.

Diagrammatical Representation Diagrams are used to represent the tabulated data diagrammatically as this will give a clear picture about the information collected. The diagrams used includes Bar diagram, Pie Charts etc.

Chi square distribution The chi-square test is used in order to estimate how closely an observed distribution matches an expected distribution. It also helps in estimating whether two random variables are independent. In the report Chi square distribution has been used in order to find out whether the variables are inter-related or not.

Spearmans rank correlation Spearmans rank correlation is used in order to study the correlation between two inter dependent variables. Spearman's Rank Correlation is a technique used to test the direction
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and strength of the relationship between two variables. In other words, its a device to show whether any one set of numbers has an effect on another set of numbers. The Spearman coefficient is denoted with the Greek letter rho ().

LIMITATIONS OF THE STUDY

Area of the study is limited to one city only so the findings may not hold true for large cross section of population. Getting appropriate response from the respondents due to their lack of interest and ignorance. Time and resource constraint were the major limitations affecting various aspects of the study. The sample size is small for the accurate study of the customer.

Research design is a logical and systematic plan prepared for directing a research study. It specifies the objectives of the study and techniques to be adopted to achieve the stated objectives. It is a specification of methods and procedures for acquiring the information needed for solving the problem. It involves arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. So a research design is the conceptual structure within which research is conducted.

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LITERATURE REVIEW

A)

Online Stock trading Software Programs Simplified - By Christian James: 2010

This article discusses how easy online trading become over the recent past has become so easy. Ever since online investing came to people's living rooms the quantity of online stock trading applications that came out is staggering. Stock analysis lends itself very well to PC software and with the capability to take the place of so many manual tasks, trading online has never been easier. The times of manually trading trend lines and looking long and hard at empty graphs appeared to be finally over. These days we are able to see super complicated stock data at the push of a button.

B)

Trading Stocks Online For Beginners - By Sanjeev Savant: 2010

The article compares the past and the recent. In the good old days (or bad), when we had to call
our broker to buy or sell a stock. The whole process was so time consuming. It took hours to finally get a confirmation about our trades. Not to forget the high cost that went along with it.

But all that is history. Now we can go online and trade stocks whenever we want, of course during the trading hours, and get immediate confirmation about our trade. Besides this we can login any time into our account to check the real time status of your account. However it would be unwise to think that if we are trading online we will have no access to a personal broker to help us with y\our investment decisions. Some brokerage firms do provide that option but it does come with a slight fee. At the same time if one thinks that he can take
control of his investment account then online accounting has made it all possible.

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C)

ONLINE STOCK TRADING: SRATEGIES AND PITFALLS BY Mark Crisp, 2004

The article discusses the tips and strategies for online stock market trading so as to minimize risk and to earn a healthier online trading profits. It describes the wide range of information sources, conducting ones own research to validate or discard the information and consistency in the application of online trading strategies based on such information.

D)

THE CHARACTERISTICS OF ONLINE INVESTOR BY Konnari Uchida, JOURNAL OF BEHAVIOURAL SCIENCE

This article is explores the characteristics of Japanese online investors. Main findings of the research are young men are more likely to engage in online trading ,employed investors trade online more frequently ,implying that proximity to the information network of the workplace investor decisions to trade online. Japanese online investors prefer capital gains, do not prefer low-volatility stocks, refer to chart data when making investing decisions more frequently, and tend to choose stocks to buy and sell on their own.

E)

Short Term vs. Long-Term Investments - The Choice Is Yours - By Ernest Achesa: 2010

This article helps us learn about two broad categories of investors. People, who get into investments for the short term, are those that go into the stock market or over the counter exchanges, make purchase - mostly with popular stocks, with the hope of making money through capital gains. On the other hand, the other group of people is those who get into the stock market, they decide that they want to get in for the long-term and make careful purchases. They definitely look at the share price of the company, but they are more concerned about the dividends of the company and the returns that will have without necessarily selling his company through the stock exchange.

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F)

ONLINE TRADING - By John G., BUSINESS LINE, JULY 2000

The article talks about the Geojits internet trading model which discusses the interface between the broker, banker and the depository participant. The article explains the benefits of such an interface using the internet to brokers as well as clients. It offers seamless trading and settlement facilities. The broking industry is said to have an impact as the brokers would calculate commission on the basis of number of transactions rather than value of transactions. When this happens, it will be a rude shock to the broking community unless it changes very fast. It is expected that the growth of Internet-based trading as a mass trading technique in the country is unstoppable, going by the indicators available and the signals for the future. When it ultimately gathers momentum, the biggest beneficiary will be the investor, who will be able to trade with greater speed and transparency, and at lower costs.

G)

Online Stock Trading in India: An empirical investigation -By Nidhi Walia and Ravinder Kumar: 2007

The research report examined the investors preference for traditional trading and online trading, investors perception on online trading and comparing current usage of online trading and offline trading. This study reveals that out of every 100 investors only 28 trade online, which points out a question as why investors were not able to realize the importance of technology in stock trading. Online trading has gained momentum from just 0.5% of total traded volumes 5 Years back, which now accounts for 5% of the total trading volume of approximately Rs 14000 Cr on NSE. Over the past 2 years, the value of all trades executed through Internet on NSE has grown from less than Rs 100 cr in June 2003 to over Rs 700 Cr in June 2005. The major findings of the study are that Indian investors are more conservative, they do not change easily and Indian traditional traders still choose brokers for trading, whereas net traders are more comfortable with online trading for its transparency and complete control of the terminal.

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INTRODUCTION TO THE COMPANY

RELIGARE ENTERPRISES LTD:

Company profile A diversified financial services group with a pan-India presence and presence in multiple international locations, Religare Enterprises Limited ("REL") offers a comprehensive suite of customer-focused financial products and services targeted at retail investors, high net worth individuals and corporate and institutional clients.

REL, along with its joint venture partners, offers a range of products and services in India, including asset management, life insurance, wealth management, equity and commodity broking, investment banking, lending services, private equity and venture capital. Religare has also ventured into the alternative investments sphere through its holistic arts initiative and film fund. With a view to expand and diversify, REL operates in the life insurance space under 'Aegon Religare Life Insurance Company Limited' and has launched India's first wealth management joint venture under the brand name 'Religare Macquarie Private Wealth'. REL, through its subsidiaries, has launched India's first holistic arts initiative - with a gallery - as well as the first SEBI approved film fund, which is an initiative towards innovation and spotting new opportunities for creation and maximization of wealth for investors.

REL operates from seven domestic regional offices, 43 sub-regional offices, and has a presence in 498* cities and towns controlling 1,837* business locations all over India. To make a mark in the global arena, REL acquired UK-based Hichens, Harrison & Co. in 2008 which was subsequently re-named as Religare Hichens Harrison PLC ("RHH"). Hichens, Harrison & Co. was incorporated in London in the year 1803 and is believed to be one of the oldest firms of stockbrokers in the City of London. Pursuant to expansion of REL's business, the company has grown from largely an equity trading company into a diversified financial services company. With the addition of RHH the REL group now operates out of multiple global locations, other than India, (the UK, the USA, Brazil, South Africa, Dubai and Singapore).

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VISION, MISSION AND BRAND ESSENCE

Vision To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India'.

Mission Providing one complete Fast and Easy to Deploy, Flexible, Legal, Validity, Low Cost of Ownership, Reliable Platform to Invest in Equity, Derivative, Commodities, Mutual Fund, IPOs with a prime objective to create the value for the investors hard earn money. As per the Quality Policy, Religare securities will: Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services. Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers. Use state-of-the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients. Strive to be a reliable source of value-added financial products and services and constantly guide the individuals and institutions in making a judicious choice of same. Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and regulatory authorities) proud and satisfied.

Brand Essence Core brand essence is Diligence and Religare is driven by ethical and dynamic processes for wealth creation.

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GROUP STRUCTURE

Religare Securities Limited Retail Equity Broking Online Investment Portal Portfolio Management Services Depository Services

Religare Commodities Limited Commodity Broking Business

Religare Capital Markets Limited Investment Banking PE and M&A Advisory

Investment Banking

Religare Hichens Harrison Corporate Broking Institutional Broking Derivatives Sales

Religare Finvest Limited Lending and Distribution business

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Religare Insurance Broking Limited Life Insurance Broking Business Non-Life Insurance Broking Business

Religare Arts Initiative Limited Business of Art Art Gallery Art Advisory

Religare Venture Capital Limited Private Equity and Investment Manager

Religare AMC Limited Asset Management Business Portfolio Management

Religare Venture Capital Private Limited Private Equity and Investment Manger

Religare Macquarie Wealth Management Limited Joint Venture with Macqurie for Wealth Management Business

Religare AEGON AMC 50:50 Joint Venture between REL and AEGON for Asset Management business in India

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AEGON Religare Life Insurance Life Insurance Company, Joint Venture between REL(44%), AEGON(26%) and Bennett & Coleman(30%)

Religare Finance Ltd. Capital Market Financing

Vistaar Religare Capital Advisors Limited Joint Venture with Vistaar Entertainment Ventures for film fund Indias first ever film fund

BRAND IDENTITY

Name

Religare is a Latin word that translates as 'to bind together'. This name Religare was chosen to reflect the integrated nature of the financial services the company offers. The name is intended to unite and bring together the phenomenon of money and wealth to co-exist and serve the interest of individuals and institutions, alike.

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Symbol

The name is paired with the symbol of a four-leaf clover, a rare mutation of the common three-leaf clover. Traditionally, it is considered good fortune to find a four-leaf clover as there is only one four-leaf clover for every 10,000 three-leaf clovers found. Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars. The second leaf of the clover represents Trust. The ability to place ones own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all not in the binding but in the bond that is built. The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship. The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all. The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success. Hope. Trust. Care. Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolize the values that bind together and form the core of the Religare vision.

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CLIENT INTERFACE

Retail SpectrumTo cater to a large number of retail clients by offering all products under one roof through the Branch Network and Online mode Equity and Commodity Trading Personal Financial Services Mutual Funds Insurance Saving Products Personal Credit Personal Loans Loans against Shares Online Investment Portal

Institutional SpectrumTo Forge & build strong relationships with Corporate Client and Institutions Institutional Equity Broking Investment Banking Merchant Banking Transaction Advisory Corporate Finance

Wealth Spectrum To provide customized wealth advisory services to High Net worth Individuals Wealth Advisory Services Portfolio Management Services International Advisory Fund Management Services
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CENTRAL LEADERSHIP TEAM

Board of Directors Religare Enterprises Limited

Mr. Sunil Godhwani - Chairman and Managing Director Mr Shachindra Nath - Group CEO Mr. Anil Saxena - Group CFO Mr. Harpal Singh - Non Executive Director Mr. Deepak Ramchand Sabnani - Independent Director Ms. Kathryn Matthews - Independent Director Mr. Padam Bahl - Independent Director Mr. J. W. Balani - Independent Director Ms. Sunita Naidoo - Independent Director Mr. Stuart D Pearce - Independent Director Mr. R. K. Shetty - Alternate to Mr. J. W. Balani Capt. G. P. S. Bhalla - Alternate to Mr. Deepak Sabnani

CEOs
Mr. Anuj Gulati - Religare Health Insurance Co. Ltd. Mr. Basab Mitra - Religare Enterprises Limited Mr. Gagan Randev - Religare Securities Limited Mr. Kamlesh Dangi - Religare Enterprises Limited Mr. Kavi Arora - Religare Finvest Limited Mr. Martin Newson - CReligare Capital Markets Mr. Rajiv Jamkhedkar - AEGON Religare Life Insurance Company Limited Mr. Saurabh Nanavati - Religare Asset Management Company Private Limited Mr Tarun Kataria - Religare Capital Markets India

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NEW INITIATIVES

Religare Capital Markets Limited, the wholly owned subsidiary of Religare Enterprises Limited (REL), the holding company for financial services businesses of the group has proposed to acquire Londons oldest brokerage firm - Hichens Harrison & Co Plc. This acquisition will provide Religare with the opportunity of creating a global distribution and execution platform within emerging countries and surely help the Group to emerge as a global player in the financial services market to provide small and medium Indian corporate with much needed access to capital.

Hichens Harrison is well placed in the emerging markets of Johannesburg, Cape Town, Jakarta, Kuala Lumpur, Buenos Aires, Rio de Janero, Dubai and Mumbai.

Femme Power, an initiative by Religare, proposes to empower non-working women to explore an alternative career that gives them the freedom to work on their own terms and conditions.

This program will serve as a platform that will allow women to have a brilliant new start with zero investment and will give them an opportunity to learn various aspects of the financial markets. By introducing and generating leads via references from the existing base of online customers, employees and personal contacts, they will earn themselves fulfilling monetary rewards.

The initiative is being packaged in a way that will enable the homemakers to strike a perfect balance between work and family life, give a free rein to their potential, and discover a whole new world of independence.
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CODE OF CONDUCT

Preamble This Code of Conduct (hereinafter referred to as the Code) has been framed and adopted by Religare Enterprises Limited (hereinafter referred to as REL) and its subsidiaries(hereinafter referred to as the Company) in compliance with the provisions of Clause 49 of the Listing Agreement. The Code is in alignment with the Companys Vision and Values to achieve the Mission and objectives and aims at enhancing ethical transparent process in managing the affairs of the Company.

Applicability The Code is applicable to the Board of Directors (hereinafter referred to as Board Members) and the Senior Management Personnel, immediately one level below the Board Members. The Company Secretary shall be the Compliance Officer for the purpose of this Code of Conduct.

PURPOSE
The purpose of the Code goes beyond the Legal Minimum and has been framed to: Promote ethical standards of business conduct; Maintain the culture of honesty, integrity, transparency and accountability in the Board Members and Senior Management Personnel; Provide guidance in the identification and resolution of issues; Uphold the spirit of social responsibility and accountability in line with the legislations, regulations and guidelines governing the Company; and Last of all, to comply with the provisions of Clause 49 of the Listing agreement.

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Standards of Ethical Conduct

The Board Members and the Senior Management Personnel shall act within the powers conferred on them and shall observe the highest standards of ethical conduct and integrity and shall work to the best of their ability and judgment. In addition, the Board Members and the Senior Management Personnel Shall maintain and help the Company in maintaining highest standards of Corporate Governance practices; Shall act in utmost good faith and exercise due care, diligence and personal and professional integrity in the performance of their official duties and responsibilities and shall in no event compromise with their independence of judgment; Shall not exploit for their own personal gain, opportunities that are discovered through use of corporate property information or position unless the opportunity is disclosed fully in writing to the Board of Directors of the Company and the Board declines to pursue such opportunity and allow him to avail such opportunity; Shall avoid and disclose actual and apparent conflict of personal interest with the interest of the Company and to disclose all contractual interests whether directly or indirectly in any manner which gives them or their relative or firm or associate, any pecuniary benefit, regardless of the value involved with the Company; Shall not commit any offence involving moral turpitude; Shall promote professionalism in the Company.

Conflict of Interest
A Conflict of interest occurs when personal interest of the Board Members and Senior Management Personnel interferes or appears to interfere, in any way, with the interests of the Company.

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The Board Members and Senior Management Personnel shall not engage in any business relationship or activity, whether directly or indirectly, which may be in conflict of interest of the Company. Although this duty does not prevent them from engaging in personal transactions and investments, it does, however, demand that they should avoid situations where a conflict of interest might occur or appear to occur.

Some of the possible instances being mentioned below. Employment / Outside Employment: The Board Members and Senior Management Personnel are expected to devote their full time and attention to the business interests of the Company and are further prohibited from engaging in any activity prejudicial to the interests of the Company. Any simultaneous employment or Directorship with competitors of the Company, or any engagement in any activity thereby strengthening their position is considered to be against the business interests of the Company.

Outside Directorships: No Board Member and Senior Management Personnel shall serve as a Director of any Company that competes directly or indirectly with the Company unless previously unanimously agreed to by the Board of Directors. Further, each Board Member and Senior Management Personnel shall inform the Board of Directors of any changes in his Board positions and shall inform the company immediately about emergency situation that may disqualify him from Directorship.

Business Interests: If any Board Member and Senior Management Personnel is considering investment in the business of any competitor of the Company, he should ensure that these investments do not
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compromise on their responsibilities towards the Company. Before making Substantial Investment in the business of the Competitor, the Board Member and Senior Management Personnel shall obtain approval of the Board of Directors of the Company. Related Parties: The Board Members and Senior Management Personnel, before conducting business of the Company with a Related Party or a Relative and/or with a business in which a relative is associated in any significant role, shall promptly disclose their interest to the Board of Directors of the Company. For the sake of clarity, the term Relative shall mean relative as defined in Section 2(41)and Section 6 read with Schedule IA to the Companies Act, 1956.

No Payments or gifts from others: Under no circumstances, the Board Members and Senior Management Personnel shall accept or receive, directly or indirectly, any gift, payments or favour, in whatsoever form, from Companys business associates, which can be perceived as being given to gain favour or dealing with the Company or which may influence any business decision.

Transactions in shares of the Company and prevention of insider trading : The Board Members and Senior Management Personnel of the Company shall not indulge in trading in Companys securities on the basis of unpublished price sensitive information. All Board Members and Senior Management Personnel will comply with the prevention of insider trading guidelines as issued by SEBI.

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Conduct of Business: The Board Members and the Senior Management team shall conduct the Companys business in an efficient and transparent manner and in meeting its obligations to shareholders and other stakeholders.

Reporting: The Directors and the Senior Management team shall immediately bring to the notice of the Board about any unethical behavior, actual or suspected fraud or violation of companys Policies.

Protection of Companys Assets The Board Members and Senior Management Personnel shall endeavor to protect the assets and proprietary information of the Company and ensure that the same are being used by the Company only for business purposes of the Company. Any suspected incident or fraud or mismanagement of the assets of the Company should be immediately reported to the Chairman or Managing Director or Compliance Officer of the Company.

Confidential Information The Board Members and Senior Management Personnel shall maintain confidentiality of Confidential Information entrusted by the Company or acquired during performance of their duties and shall not use it for personal gain or advantage. They shall, at all times, ensure compliance with SEBI (Prohibition of Insider Trading) Regulations, 1992 as also other regulations, as may become applicable to them, from time to time. This obligation shall apply to the Board Members and Senior Management Personnel not only during their tenure or employment with the Company but even after the cessation thereof.
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Further they shall not make any statement which has the effect of adverse criticism of any policy or action of the Company or which is capable of embarrassing the relations between the company and the public including all the stakeholders. Compliance of Law The Board members and the senior management personnel shall acquire appropriate knowledge of law relating to their duties sufficient to enable them to recognize potential dangers and to know when to seek advise from the Finance, Secretarial and legal departments and shall comply with all Laws ,Rules and regulations applicable to the business of the Company.

Waivers and Amendments of the Code The Company is committed to continuously reviewing and updating its policies and procedures. However, any amendment or waiver of any provision of the Code must be approved by the Board of Directors of the Company and publicly disclosed as required by any applicable law or regulation and also on the Companys website, if any, together with details about the nature of the amendment or waiver.

No Rights Created The Code sets forth certain fundamental principles, ethics, values, policies and procedures that govern the Board Members and Senior Management Personnel in the conduct of the business of the Company. It is not intended to and does not create any rights in any employee, client, competitor, shareholder or any other person or entity.

Placement of the Code On Website Pursuant to Clause 49 of the Listing Agreement, this Code and any amendment thereto shall be posted on the website of the Company
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SERVICES RENDERED BY RELIGARE SECURITIES LTD.

Equity & Derivative Trading Lending Services ing Institutional Distribution

Insurance Broking
Private Equity

Depository Services

Commodities Internet Trading Broking Services International Investment Banking Wealth Management Equity & Commodities

EQUITY AND DERIVATIVE TRADING The term equity derivative describes a class of financial instruments whose value is at least partly derived from one or more underlying equity securities. Market participants trade equity derivatives in order to transfer or transform certain risks associated the underlying. Options are by far the most common equity derivative; however there are many other types of equity derivatives that are actively traded.

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 INSTITUTIONAL DISTRIBUTON SERVICE The Client Service Manager will be responsible for all aspects of client reporting for institutional investment clients and industry organizations. The candidate will also be responsible for client servicing which includes working with clients, internal groups and UK based portfolio management.

DEPOSITORY SERVICES Depository is an organization which holds your securities in electronic (also known asbook entry) form, in the same manner as a bank holds your money. Further, a depository also transfers your securities without actually handling securities, in the same day as a bank transfers funds without actually handling cash.

INSURANCE BROKING: The term Insurance Broker became a regulated term under the Insurance Brokers (Registration) Act 1977which was designed to thwart the bogus practices of firms holding themselves as brokers but in fact acting as representative of one or more favored insurance companies. Insurance brokerage is largely associated with general insurance (car, house etc.) rather than life insurance, although some brokers continued to provide investment and life insurance brokerage until the onset of more onerous Financial Services Authority regulation

WEALTH MANAGEMENT SERVICES: Wealth management services are provided by banks, professional trust companies, and brokerages. For those with sizeable assets [usually over $500,000], professional wealth management can help you plan your estate or invest your assets based on personal criteria and financial goals.

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 INVESTMENT BANKING Investment Banking is facing a strangle of challenges today lower margins, compliance issues, workflow disconnects and data redundancies. Investment banks need a partner who can work in market-time to address all these business challenges.

COMMODITIES BROKING SERVICES Commodity Broking Services specializes in offering online accounts to clients wishing to deal in the Foreign Exchange, Bullion, Futures, Commodities, CFDs and

International/Domestic Equities markets all from the one account. Commodity Broking Services specialize in offering commodity price risk management to agricultural producers and end users.

PRODUCTS OFFERED BY RELIGARE Religare products are well known for Online Trading, Offline Trading, Portfolio Management Services, Commodity Trading and Intuitional Broking services. They are listed below:

1. Online Trading in Equity Markets: Online Trading products in Equity markets are named as RACE, which is divided into three segments, RACE-basic, lite and Pro.

Features of RACE products: Fixed Brokerage and Exposure Call center support provided for trading, back-office and IT support
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 Minimum branch level support Fully automated processes Feature-rich software Interest on cash margin deposited with Religare Target Group Mass Market USP

Offline Trading Products in Equity markets are named as R-ALLY, which is divided into

R-ALLY Classic: Trade over the phone R-ALLY Lite: A browser based internet trading facility R-ALLY Pro: An application based diet Odin (software) over Internet

Features of R-ALLY products: Flexible brokerage & exposure No call center support Full branch level support High level of manual intervention for flexible processes Basic software No interest on cash margin Target Group High Volume Traders

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2. Depositories:

Religare is among the few major Depository Participants holding securities worth more than Rs.6000 crores under its management. RSL provides depository services to investors as a Depository Participant with NSDL and CDSL.

The Depository system in India links issuers, depository participants, depositories National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and clearing house / clearing corporation of stock exchanges. These facilitate holding of securities in dematerialized form and securities transactions are processed by means of account transfers.

3. Portfolio management:

Schemes:

Panther The Panther portfolio aims to achieve higher returns by taking aggressive positions across sectors and market capitalizations. It is suitable for the High risk high return investor with a strategy to invest across sectors and take advantage of various market conditions.

Tortoise The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time by way of careful and judicious investment in fundamentally sound companies having good prospects. The scheme is suitable for the Medium Risk Medium Return investor with a strategy to invest in companies which have consistency in earnings, growth and financial performances.

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Elephant The Elephant portfolio aims to generate steady returns over a longer period by investing in securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the Low Risk Low Return investor with a strategy to invest in blue chip companies, as these companies have steady performance.

Caterpillar The Caterpillar portfolio aims to achieve capital appreciation over a long period of time by investing in a diversified portfolio. The investment strategy would be to invest in scrips which are poised to get a re-rating either because of change in business, potential fancy for a particular sector in the coming years/months, business diversification leading to a better operating performance, stocks in their early stages of an upturn or for those which are in sectors currently ignored by the market.

Leo Leo is aimed at retail customers and structured to provide medium to long-term capital appreciation by investing in stocks across the market capitalization range. Its aim is to have a balanced portfolio comprising selected investments from both Tortoise and Panther. Exposure to Derivatives is taken within permissible regulatory limits.

4. Institutional Broking Services The mission of this division is to institutionalize and implement a process driven approach to cater to the needs of leading corporate houses and institutions. The division would like to be seen as a one stop investment gateway and knowledge repository for its clients servicing their unique and sophisticated needs. The division is structured as a separate SBU and is housed out of Mumbai, manned by a small yet fleet footed and extremely skilled group of top notch professionals drawn from the best in the industry.

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SWOT ANALYSIS OF RELIGARE STRENGTHS It is the Ranbaxy promoter group company. It has a good research team. No Annual maintenance charges for their online broking services Has diverse products and is a very trusted name in the financial sector

WEAKNESS High comparative brokerage It has changed its name from FORTIS to RELIGARE where the maximum

Customers dont know about this

OPPORTUNITY Financial services sector in India is growing by leaps and bounds. In the upcoming days RELIGARE is coming up with their own mutual fund and Banking.

THREATS Cut-throat competition from corporate big houses like Reliance and ICICI As they have changed the name of their company the customer still does not know about RELIGARE. Customers are shifting due to high cost and low shifting costs to competitors like Indiabulls and ICICI.
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1) Table 1: Age wise distribution of the respondents Age group 20 30 30 40 40 50 50 60 Total Number of Respondents 37 18 11 9 75

Chart 2: Age wise distribution of the respondents

Age wise distribution of respondents

9 20 30 11 37 30 40 40 50 50 - 60 18

Inference: From the above table, one can interpret that most of the respondents fall in the age category of 20 to 30 i.e. around 37 people fall in this category out of 75 respondents. This is followed by the age group of 30 to 40 wherein there are 18 respondents. The lowest number of respondents is in the category of 50 to 60 being just 9.

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2)

Table 2: The occupation wise distribution of the respondents

Occupation Private Employee Government Employee Business Man Others Total

Number of respondents 38 9 22 6 75

Chart 3: The occupation wise distribution of the respondents

Occupation
40 35 30 25 20 15 10 5 0 Private Employee Government Business Man Employee Others 9 6 Number of respondents 22 38

Inference: It is evident from the graph and the table above that majority of the respondents is private employees numbering to 38 out of 75 which are then followed by businessmen who amount to 22. There are also students among the respondents who belong to the others category.
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3) Table 3: Income distribution pattern among the respondent Income Group 0 - 1,50,000 1,50,000 - 3,00,000 3,00,000 - 4,50,000 4,50,000 and above Total Number of Respondents 12 6 19 38 75

Chart 4: Income distribution pattern among the respondents

Income groups
40 35 30 25 20 15 10 5 0 0 - 1,50,000 1,50,000 - 3,00,000 3,00,000 - 4,50,000 4,50,000 and above 12 6 19 38

Inference: Around 38 respondents earn between 4, 50,000 and above. Then there are those who earn between the income level of 3, 00,000 to 4, 50,000.The lowest number belong to the category of 1, 50,000 -3, 00,000. There are also 12 respondents who fall in the category of 0 to 1,50,000.

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4) Table 4: Types of Investors

Number of Type of investor Respondents

Percentage of Respondents (%)

Very inexperienced Investor Somewhat Investor inexperienced

12

16

Somewhat experienced Investor 18

24

Experienced Investor

32

43

Very experienced Investor

Total

75

100

Inference: Majority of the respondents i.e. around 43% are experienced and followed by 24% as somewhat experienced. But then on the other side, there are also a considerable number of them who are very inexperienced (around 16%). The rest of the respondents belong either to the category of somewhat inexperienced or very experienced.

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Chart 5: Types of Investors

Types of investors (%)

8 16 9 Somewhat inexperienced Investor Somewhat experienced Investor Experienced Investor 43 24 Very experienced Investor

Very inexperienced Investor

Inference: The above data can be graphically represented in the following manner. The given data indicates that majority of the experienced respondents are willing to take moderate to high risk whereas the inexperienced ones are still are mostly low risk takers. Similarly the age group pattern also reflects the risk taking ability. The ones in the higher age group prefer low risk as compared to their younger counterparts.

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5) Table 5: Factors affecting an investors decision

Factor Influencing Investment Decision

Number of Respondents

Percentage of Respondents (%)

Mainly potential gain

More by potential loss than potential gain 24 32

More by potential gain than potential loss 28 37

Mainly by potential loss

17

23

Total

75

100

Inference: About 23% of the respondents are influenced by the thought of potential loss while making any investment decision. While on the contrary 8% believe in potential gain while making such decisions. The rest belong to the category wherein they are moderately influenced by either gain or loss.

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Chart 6: Factors affecting an investors decision

Factors influencing investment decision (%)

8 23

Mainly potential gain More by potential loss than potential gain More by potential gain than potential loss Mainly by potential loss

32

37

Inference: The above graph depicts the factors that affect an investors investment decisions when trading online. It is evident that majority of the respondents are affected by the thought of potential gain than loss while investing (37%). Also, closely following are respondents who think more of potential loss than gain while investing (32%). Surprisingly there are very few risk takers who think only of gain on investment.

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6)

Table 6: Mode of investment

Number of Mode of investment Respondents

Percentage of Respondents (%)

Online

54

72

Offline

21

28

Chart 7: Mode of investment

Mode of investment (%)

28

Online Offline 72

Inference: On being asked about the prospects of investing online a surprising nearly 72% of the respondents said they were trading online proving the popularity of online trading among the investors and its increasing importance. This is highlighted in the following table and graph given below.
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7) Table 7: Convenience and Easiness of online trading

Age Group 20 30 30 40 40 50 50 - 60 Total Total (%)

No 4 2 0 3 9 12

Some extent 14 1 6 4 25 33

Quite an extent 17 12 5 2 36 48

Very Easy 2 3 0 0 5 7

Inference: When the respondents were asked whether they felt that online trading was easy and convenient to them, 55% of them believed that it was so and 33% believed it to some extent. However only a small percentage (12%) said they did not find it that convenient. On being asked as to why, majority of them felt that online trading helped in saving a lot of time and energy. It is a good alternative to offline trading as ones physical presence is not required for trading purposes in a stock exchange. It offers real time stock trading without calling or visiting broker's office. Also Customers can modify the placing orders according to the market movements.

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Chart 8: Convenience and Easiness of online trading

Convenience of Online trading (%)

12 33 No Some extent

48

Quite an extent Very easy

Inference: The above graph depicts clearly that majority of the respondents consider online trading as convenient and easy. However there are some of them who belong to that category who believe it to be convenient to some extent usually the elderly investors who are most accustomed to the traditional mode of trading. However the trend is fast changing with increasing popularity of online over offline.

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8) Table 8: Knowledge on online investment Number of Knowledge on online investment No To some extent Quite an extent Fully aware Total Respondents 12 21 42 0 75 Percentage of Respondents (%) 16 28 56 0 100

Chart 9: Knowledge on online investment

Knowledge on online investment

60 50 40 30 20 10 0 No 0 To some extent Quite an extent Fully aware 16 28 Percentage of Respondents (%) 56

Inference: The survey reveals that majority of the total number of respondents are still not aware of online investment and lack sufficient knowledge. Around 16 % are ignorant about investing online whereas 28% are aware of it to some extent. Moreover, none of them claim to be fully aware of all the aspects of online investing. This data clearly highlights the need for investors education in India.

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9) Table 9: Types of products that respondents prefer to buy online

Number of Type of products Equities Bonds Mutual funds Foreign exchange Others Respondents 24 16 6 9 20

Percentage of Respondents (%) 32 21 8 12 27

Inference: It is evident from the graph below that majority of the investors trade in equities. It is preferred highly among investors (32%).This is followed by investment in bonds which is around 21%. Foreign exchange market is also being traded to an extent of 12 %. Around 8% of the respondents preferred mutual funds to be traded online and 27% traded products other than these.

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Chart 10: Types of products that respondents prefer to buy online

Types of products (%)

27 32 Equities Bonds 12 Mutual funds Forex Others 8 21

10) Table 10: Flexibility of Online Trading

Flexibility Online Offline Total

Number of Respondents 47 28 75

Percentage of Respondents (%) 63 37 100

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Chart 11: Flexibility of Online Trading

Flexibility
70 60 50 40 30 20 10 0 Online Offline 37 Percentage of Respondents (%) 63

Inference: Since customers can modify the placing orders in online trading according to the market movements this adds to its flexibility. Around 63% of the respondents believe that online trading is more flexible. One of the possible reasons is that there is no paper work involved and very less legal formalities which makes it flexible. All one needs to do is log into ones account in order to buy or sell shares or to just watch how ones portfolio is performing.

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11) Table 11: Safety of online trading

Number of Safety of online trading Respondents

Percentage of Respondents (%)

No

12

To some extent Quite an extent Very safe

41 24 1

55 32 1

Total

75

100

Inference: On being asked about the safety aspect of online trading, the view seems to be divided mostly between those who believe it is safe to some extent and those who believe it to be safe to quite an extent. However, none of the respondents were fully confident of the safety aspect and believed that it was not fully safe to trade online. Also around 12% of the people believed that online trading is not safe at all.

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Chart 12: Safety of online trading

Safety of online trading

60 50 40 30 20 10 1 0 No To some extent Quite an extent Very safe 12 32 Percentage of Respondents (%) 55

12)Table 12: Level of Volatility

Number of Level of volatility No volatility Low volatility Average volatility High volatility Total Respondents 0 30 28 17 75

Percentage of Respondents (%) 0 40 37 23 100

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Chart 13: Level of Volatility

Level of volatility (%)

0

23 40 No volatility Low volatility Average volatility High volatility

37

Inference: The graph above evidently explains the level of volatility that the investors are prepared for. Most of them expect average volatility in the markets while closely followed by is the number of people who would prefer low volatility. However some of the risk taking investors has opted for high volatility to earn more returns.

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13) Table 13: Risk Evaluation

Number of Risk evaluation Taking suggestion of those who have invested Discussing with consultant Discussing with family and friends Observing the investment 32 24 26 23 Respondents

Percentage of Respondents (%)

43 32 35 31

Inference: Risk is the possibility you'll lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed. According to modern investment theory, the greater the risk you take in making an investment, the greater your return has the potential to be if the investment succeeds. A close study of the investors risk evaluation reveals that investors who are moderate risk takers usually prefer to take suggestion from those who have invested. Similarly they also opt for professional consultancy. However there are also quite a few of them who prefer to play safe. They observe the investment for some period of time before finally being convinced whether it is safe to invest in such securities or not. The graph above depicts that 43% of respondents prefer to seek advice from those who have already invested before while 35% prefer to discuss it with their family and friends.

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Chart 14: Risk Evaluation

Risk evaluation
45 40 35 30 25 20 15 10 5 0 Taking Discussing with Discussing with Observing the suggestion of consultant family and investment those who have friends invested Percentage of Respondents (%) 32 43 35 31

14) Table 14: Technical Problems faced Number of Technical problems Failure to log in Network blackout Server crash Site freezing due to overload Loss due to mechanical failures Slow internet service by broker Others Respondents 4 6 20 33 22 15 20 Percentage of Respondents (%) 3 5 17 28 18 13 16

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Inference: The greatest disadvantage of online trading is the inability of a network to be fail-safe. Computers in spite of the technological advances are by no means perfect. There are a number of technical problems faced by investors while trading online. In the above table and graph it is shown that site freezing due to overload is the most common problem that investors face, followed by mechanical failures leading to unexpected losses. About 13% cite the slow internet service provided by the brokers as one of the online trading problems. Again many of the respondents have complained about server problems also as a common problem (17%).

Chart 15: Technical Problems faced

Types of technical problems (%)

30 25 20 15 10 5 0 3 5 Percentage of Respondents (%) 17 18 13 16 28

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15 Table 15: Cost efficiency

Number of Cost efficiency Respondents

Percentage of Respondents (%)

Online

67

89

Offline

11

Total

75

100

Chart 16: Cost efficiency

Cost efficiency
100 80 60 40 20 0 Online Offline 11 Percentage of Respondents (%) 89

Inference: The above data shows that around 89% of the investors believe that online trading is quite cost efficient. This is mainly because of the less commission charges to be paid unlike traditional brokerage houses. On the other only a small number of respondents out 75 believe that offline is more cost efficient than online.

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16)

Table 16: Mistakes while trading online and offline Number of Percentage of Respondents (%) 52 48 100

Chances of mistakes Online Offline Total

Respondents 39 36 75

Chart 17: Mistakes while trading online and offline

Chances of mistakes (%)

52 52 51 50 49 48 47 46 Online Offline 48 Percentage of Respondents (%)

Inference: A novice online investor with no sound financial basics is more likely to invest without proper analysis of the stocks fundamentals like the key financial ratios, etc. Online trading sites provide investors with vast amount of market information without any sort of personal advice. This is why around 55% of the investors felt that there were more chances of making mistakes while trading online. The absence of professional advice by a broker could possibly be the reason for greater chances of mistakes.
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17) Table 17: Better investment decisions while trading online

Age Group

Strongly Agree Agree Disagree Strongly Disagree

20 30

28

30 40

40 50

50 - 60

Total

35

18

17

Inference: About 23% respondents strongly support offline mode of investment when it comes to making investment decisions. Also 24% of the respondents believe that offline serves better investment decisions than online as one may get the professional advice of brokers. Surprisingly, on the other around 46% of the respondents feel that they can carry out better investment decisions while trading online. These were basically the ones who were very well informed about the markets and believed they could take effective and efficient investment decisions.
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Chart 18: Better investment decisions while trading online

Better investment decisions while trading online (%)

50 40 30 20 10 0 Strongly agree Agree Disagree Strongly disagree 7 46 24 23 Total (%)

18) Table 18: Privacy

Quite an Age Group 20 30 30 40 40 50 50 - 60 Total Total (%) No 2 3 2 0 7 9 Some extent 10 2 1 3 16 22 Extent 22 13 8 6 49 65

Very Private 3 0 0 0 3 4

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Inference: Some online brokers have security measures in place to protect the loss, misuse and alteration of the information under their control. The transfer of confidential information such as credit card numbers and financial data are communicated via state of-the-art encryption. Their web server and database reside behind a firewall in a secure datacenter with fault tolerance, offsite backup and fire protection. The table given above shows the extent to which online investment serves privacy. It is evident that people have preferred online over offline mode of investment. This is mainly because online serves greater autonomy and a greater degree of control over ones investments. One can take ones own decisions .The graph clearly indicates that 69% of the respondents feel that online serves more privacy as compared to offline.

Chart 19: Privacy

Privacy (%)
70 60 50 40 30 20 10 0 No some extent Quite an extent Very private 9 4 Total (%) 22 65

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STATISTICAL ANALYSIS The variables have been analyzed using the following statistical tools:

THE CHI SQUARE STATISTIC In probability theory and statistics, the chi-square distribution (also chi-squared or 2 distribution) is one of the most widely used theoretical probability distributions in inferential statistics, e.g., in statistical significance tests. It is useful because, under reasonable assumptions, easily calculated quantities can be proven to have distributions that approximate to the chi-square distribution if the null hypothesis is true. The best-known situations in which the chi-square distribution is used are the common chisquare tests for goodness of fit of an observed distribution to a theoretical one, and of the independence of two criteria of classification of qualitative data. Many other statistical tests also lead to a use of this distribution, like Friedman's analysis of variance by ranks. Generally speaking, the chi-square test is a statistical test used to examine differences with categorical variables. There are a number of features of the social world we characterize through categorical variables - religion, political preference, etc. To examine hypotheses using such variables, we use the chi-square test. The chi-square test is used in two similar but distinct circumstances: 1. For estimating how closely an observed distribution matches an expected distribution we'll refer to this as the goodness-of-fit test 2. For estimating whether two random variables are independent. Since there are basically two types of random variables and they yield two types of data: numerical and categorical. A chi square (X2) statistic is used to investigate whether distributions of categorical variables differ from one another. Basically categorical variable yield data in the categories and numerical variables yield data in numerical form.

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The x-axis is the chi-square value calculated from the formula. The y-axis is the number of individual experiments that got that chi-square value. You see that there is a range here: if the results were perfect you get a chi-square

value of 0 (because observed = expected). This rarely happens: most experiments give a small chi-square value (the hump in the graph). Note that all the values are greater than 0: that's because we squared the (observed = expected) term: squaring always gives a non-negative number. Sometimes you get really wild results, with observed very different from exp: the long tail on the graph. Really odd things occasionally do happen by chance alone (for instance, you might win the lottery).

Degrees of freedom A critical factor in using the chi-square test is the degrees of freedom, which is essentially the number of independent random variables involved. Degrees of freedom is simply the number of classes of any variable.

80

For our example, there are 2 classes of variable purple and white. Thus, degrees of freedom (d.f.) = 2 -1 = 1.

A chi square value is obtained by the formula: 2 = (fo - fe)2 fe Where fo = the observed frequency fe = the expected frequency in terms of null hypothesis. Also, expected frequency is calculated by using the following formula fe =
(Row total) (Column total)

n (total number)

SPEARMAN RANK CORRELATION Spearman's Rank Correlation is a technique used to test the direction and strength of the relationship between two variables. In other words, its a device to show whether any one set of numbers has an effect on another set of numbers.

It uses the statistic Rs which falls between -1 and +1.The Spearman Rank Correlation Coefficient is a form of the Pearson coefficient with the data converted to rankings (ie. when variables are ordinal). It can be used when there is non-parametric data and hence Pearson cannot be used. The raw scores are converted to ranks and the differences (di) between the ranks of each observation on the two variables are calculated.

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The Spearman Coefficient can be used to measure ordinal data (ie. in rank order), not interval (as Pearson). It effectively works by first ranking the data then applying Pearson's calculation to the rank numbers. This coefficient is also called Spearman's rho (after the Greek letter used). After calculating the value of rs, this is compared with the critical value of r or () in deciding whether to accept or reject the null hypothesis. For a one-tailed test df = n-1 and for a two-tailed test (most usual) df=n-2. Values of r range from +1 (perfect correlation), through 0 (no correlation), to -1 (perfect negative correlation). In general terms, correlation coefficients:

up to 0.33 are considered to indicate weak relationships between 0.34 and 0.66 indicate medium strength relationships Over 0.67 indicate strong relationships.

A) Examining the relationship between Age and Safety In this case we are studying whether Age and safety are related or not. Firstly the chi square distribution has been used in order to find out whether the variable SAFETY is dependent on AGE or not. Some Age Group 20 30 30 40 40 50 No 2 3 1 Extent 10 8 5 Quite an Extent 21 7 5 Very Safe 4 0 0

50 - 60 Total

3 9

5 28

1 34

0 4
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Chi square distribution Under this method we consider the following two cases: Null hypothesis: There is no difference between the two safety categories in their pattern of age distribution. Research Hypothesis: There is a relation between safety and age distribution pattern.

Age Distribution Youth Adults Total

Low 23 14 37

High 32 6 38

Total 55 20 75

To compute X, the expected frequency of each cell is subtracted from the observed one, squared, divided by the expected frequency of the cell and then all quotients are added up.

Observed frequency (O) 23 32 14 6

Expected frequency (E) 27.13 27.87 9.87 10.13

(O - E) 17.05 17.05 17.05 17.05 Calculated Value

(O - E)/E 0.62 0.61 1.72 1.68

4.63

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To evaluate the obtained X value (4.63), we have to compare to the critical value of sampling distribution of X and to find whether the value of 4.63 is large enough to reject the null hypothesis. The sampling distribution of X is determined by (1) the level of significance and (2) the number of degrees of freedom. The number of degrees of freedom is set by the number of cells fro which the expected frequencies can be selected freely. For any bivariate table, the cells that can be determined freely are limited by the marginal total of both the variables. Thus in a 2 x 2 table, there is only one cell that is free to vary, the three others being predetermined by the marginal total.

The formula used is given below: df = (r - 1) x (c 1) Where r = the number of rows c = the number of columns

In the given case with 1 degree of freedom and 0.05 level of significance the table value is 3.84. Our obtained X value (4.63) is larger than the table value.

Since, Calculated value (CV) > Tabulated value (TV) Hence, the null hypothesis is rejected and the research hypothesis is supported i.e., we may conclude that there is significant relationship between age and safety.

Spearmans rank order correlation After finding out whether two variables are inter related or not using the Chi square distribution we use the spearmans rank correlation method. This method is being applied in

84

order to find out how two inter related variables affect each other. It enables us to interpret how the change in one variable leads to a change in the other. The first step is to consider the mid values of the class intervals. Next, we need to add up the individual frequencies of each of the class intervals respectively. Then the third column and the fourth columns are assigned ranks as 1, 2, 3...n or in the reverse order as the case may be. Then a column di is created to hold the differences between the two rank columns (xi and yi). Finally another column The values in the should be created. This is just column di squared.

column can now be added to find d= 20. The value of n is 4. So these

values can now be substituted back into the equation as given below.

X 25 35 45 55

Y 2 + 20 + 63 + 16 = 101 3 + 16 + 21 + 0 = 40 1 + 10 + 15 + 0 = 26 3 + 10 + 3 + 0 = 16

X rank 1 2 3 4

Y rank 4 3 2 1

di = (X -Y) -3 -1 1 3 9 1 1 9 d= 20

The values in the

column can now be added to find d= 20. The value of n is 4. So these

values can now be substituted back into the equation,

= 1 - 6 x 20 4 x (15) = (-1)

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This evaluates to p = (-1) which shows that there is perfect negative association between the two sets of ranks. Thus this shows that both Age and Safety perfectly negatively correlated.

B) Examining the relationship between Age and Investment Decision Age Group 20 30 30 40 40 50 50 - 60 Total Strongly Agree 3 1 1 0 5 Agree 28 2 3 2 35 Strongly Disagree Disagree 0 6 6 6 18 6 9 1 1 17 Total 37 18 11 9 75

Chi square distribution Null hypothesis: There is no difference between age distribution pattern and the investment decisions relating to online trading. Research Hypothesis: There is a relation between Investment decisions and age distribution pattern. Age Distribution Youth Adults Total Low 34 6 40 High 21 14 35 Total 55 20 75

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To compute X, the expected frequency of each cell is subtracted from the observed one, squared, divided by the expected frequency of the cell and then all quotients are added up.

Observed frequency (O) 34 21 6 14

Expected frequency (E) 29.33 25.67 10.67 9.33 (O - E) 21.8 21.8 21.8 21.8 Calculated Value 5.95 (O - E)/E 0.74 0.84 2.04 2.33

In the given case with 1 degree of freedom and 0.05 level of significance the table value is 3.84. Our obtained X value (5.95) is larger than the table value.

Since, Calculated value (CV) > Tabulated value (TV) Hence, the null hypothesis is rejected and the research hypothesis is supported i.e., we may conclude that there is significant relationship between age and Investment decisions relating to online trading.

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Spearmans rank order correlation Just like before, after finding out whether two variables are inter related or not using the Chi square distribution we use the spearmans rank correlation method. This method is being applied in order to find out how two inter related variables affect each other. It enables us to interpret how the change in one variable leads to a change in the other. The same as in the previous cases, we assign each ranks to both X and Y variables. Then column di is created to hold the differences between the two rank columns (xi and yi). Finally another column is created which is just the square of di.

X 25 35 45 55

Y 4 + 28 + 51 + 8 = 91 2 + 2 + 36 +12 = 52 0 + 12 + 15 + 0 = 27 3 + 8 + 6 + 0 = 17

X rank 1 2 3 4

Y rank 4 3 2 1

di = (X-Y) -3 -1 1 3 9 1 1 9 d= 20

The values in the

column can now be added to find d= 20. The value of n is 4. So these

values can now be substituted back into the equation as in the previous cases,

= 1 - 6 x 20 4 x (15) = (-1)

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Now this evaluates to p = (-1) which shows that there is perfect negative association between the two sets of ranks. Hence we may conclude that there is also a perfect negative correlation between Age and Convenience.

C) Examining the relationship between Age and Convenience

Age Group 20 30 30 40 40 50 50 - 60 Total

No 4 2 0 3 9

Some Extent 14 1 6 4 25

Quite an Extent 17 12 5 2 36

Very Easy 2 3 0 0 5

Chi square distribution Null hypothesis: There is no difference between the two categories of convenience in their pattern of age distribution. Research Hypothesis: There is a relation between convenience and age distribution pattern. Age Distribution Youth Adults Total Low 21 13 34 High 34 7 41 Total 55 20 75

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To compute X, the expected frequency of each cell is subtracted from the observed one, squared, divided by the expected frequency of the cell and then all quotients are added up.

Observed frequency (O) 21 34 13 7

Expected frequency (E) 24.93 30.07 9.07 10.93

(O - E) 15.44 15.44 15.44 15.44 Calculated Value

(O - E)/E 0.61 0.51 1.70 1.41

4.23

To evaluate the obtained X value (4.23), we have to compare to the critical value of sampling distribution of X and to find whether the value of 4.23 is large enough to reject the null hypothesis.The sampling distribution of X is determined by (1) the level of significance and (2) the number of degrees of freedom.

In the given case with 1 degree of freedom and 0.05 level of significance the table value is 3.84. Our obtained X value (4.23) is larger than the table value. Since,

Calculated value (CV) > Tabulated value (TV)

Hence, the null hypothesis is rejected and the research hypothesis is supported i.e., we may conclude that there is significant relationship between age and convenience.

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Spearmans rank order correlation The same as in the previous cases, we assign each ranks to both X and Y variables as given below in the table. Then column di is created to hold the differences between the two rank columns (xi and yi).

X 25 35 45 55

Y 4 + 28 + 51 + 8 = 91 2 + 2 + 36 +12 = 52 0 + 12 + 15 + 0 = 27 3 + 8 + 6 + 0 = 17

X rank 1 2 3 4

Y rank 4 3 2 1

di = (X-Y) -3 -1 1 3 9 1 1 9 d= 20

Finally another column

is created which is just the square of di. The values in the

column can now be added to find d= 20. The value of n is 4. So these values can now be substituted back into the equation as in the previous cases,

= 1 - 6 x 20 4 x (15) = (-1) Now this evaluates to p = (-1) which shows that there is perfect negative association between the two sets of ranks. Hence we may conclude that there is also a perfect negative correlation between Age and Convenience.

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Key Findings

1) The statistical analysis reveals that there is significant relationship between age and safety. Further it has been found that both Age and Safety are perfectly negatively correlated. An increase in age pattern shows a decreasing preference towards online investment. This means that younger people consider online mode of investment as safer whereas older people still prefer offline mode of investment.

2) The analysis reveals that there is also a significant relationship between age and investment decisions. They are also in perfect negative correlation. Research shows that Elderly people regard offline as better for taking investment decisions over online. The reverse of this is true in case of the youth.

3) Further in the analysis it has been found that there exist a negative correlation between Age and convenience. The statistical analysis proves it that adults regard offline mode as convenient than online. This is mainly because of inadequate investment knowledge and also the need for personalized brokerage services. The youth on the other have preferred online investment in terms of convenience.

4) The given data indicates that majority of the experienced respondents are willing to take moderate to high risk whereas the inexperienced ones are still are mostly low risk takers. Similarly the age group pattern also reflects the risk taking ability. The ones in the higher age group prefer low risk as compared to their younger counterparts.

5) About 72% of the respondents said they were trading online proving the popularity of online trading. The rest 28% have preferred the offline mode.

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6) About 23% of the respondents are influenced by the thought of potential loss while making any investment decision. While on the contrary 8% believe in potential gain while making such decisions. The rest belong to the category wherein they are moderately influenced by either gain or loss.

7) 16 % of the respondents are ignorant about investing online whereas 28% are aware of it to some extent. Moreover, none of them claim to be fully aware of all the aspects of online investing.

8) Majority of the investors trade in equities. It is preferred highly among investors (32%). This is followed by investment in bonds which is around 21%.Forex market is also being traded to an extent of 12 % followed by mutual funds (6%).

9) Around 63% of the respondents believe that online trading is more flexible. The rest 27% prefer offline. This is so because of the less legal formalities and paperwork involved. As a result it enables one to make changes in ones investment decisions with greater flexibility as compared to offline mode of investment.

10) On being asked about the safety aspect of online trading, the view seems to be divided mostly between those who believe it is safe to some extent and those who believe it to be safe to quite an extent. However, none of the respondents were fully confident of the safety aspect and believed that it was not fully safe to trade online. Also around 12% of the people believed that online trading is not safe at all.

11) When the respondents were asked whether they felt that online trading was easy and convenient to them, 55% of them believed that it was so. And 33% believed it to some extent. However only a small percentage (12%) said they did not find it that convenient.
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12) Most of them expect average volatility (37%) in the markets while closely followed by is the number of people who would prefer low volatility, which is 23%. However some of the risk taking investors has opted for high volatility to earn more returns.

13) Investors who are moderate risk takers usually prefer to take suggestion from those who have invested. Similarly they also opt for professional consultancy. However there are also quite a few of them who prefer to play safe. They observe the investment for some period of time before finally being convinced whether it is safe to invest in such securities or not. The graph above depicts that 43% of respondents prefer to seek advice from those who have already invested before while 35% prefer to discuss it with their family and friends.

14) Site freezing due to overload is the most common problem that investors face, followed by mechanical failures leading to unexpected losses which is around 18%). About 13% cite the slow internet service provided by the brokers as one of the online trading problems. Again many of the respondents have complained about server problems also as a common problem (17%). Whereas network blackouts and failure to log in are some of the less common problems encountered.

15) The research data shows that around 89% of the investors believe that online trading is quite cost efficient. This is mainly because of the less commission charges to be paid unlike traditional brokerage houses. On the other, only a small number of respondents out 75 believe that offline is more cost efficient than online.

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16) Online trading sites provide investors with vast amount of market information without any sort of personal advice. This is why around 52% of the investors felt that there were more chances of making mistakes while trading online. Whereas the rest of the 48% believed that they were prone to make more mistakes while trading offline.

17) About 23% respondents strongly support offline mode of investment when it comes to making investment decisions. Also 24% of the respondents believe that offline serves better investment decisions than online as one may get the professional advice of brokers. Surprisingly, on the other around 46% of the respondents feel that they can carry out better investment decisions while trading online.

18) On being asked which of the modes of trading offered greater degree of privacy majority of respondents preferred online over offline. This may be because online investing gives one greater control over investments. One can do all the research (all the information is a mouse click away) and make all the decisions into what type of investments one wants to make. In offline Traditional brokers act as financial advisors that make all the decisions for the client. For some people this may be the proper alternative but many like to decide on their own.

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Based on the findings of the study conducted on the perception of Indian investors towards online trading the following suggestions have been given:

1) The research indicates that older people still do not consider online mode of investment as safe. This could be due to lack of adequate knowledge about its benefits and uses. Moreover, the research shows that none of the respondents believe that online investment is totally safe. Hence in such a case the company can take initiatives to educate its customers by spreading awareness about online trading and its merits especially for its older customers.

2) The study shows that majority of the youth prefer online over offline when it comes to taking decisions relating to investment. Again the reason for this is greater knowledge about investment. The older customers go for offline mode. The company in this regard can work towards providing a more personalized service to attract customers. It may work towards creating a proper channel through which customers can be guided personally when it comes to taking decisions.

3) The company needs to make efforts to convince its older customers to opt for online mode when it comes to convenience. Although online mode is easier given that one has the requisite knowledge to operate it. The company can make its website more user-friendly and informative in this regard. Customers should be guided thoroughly while carrying out trading and also be informed about the risk element associated. This may help in building investor confidence.

4) Through the research we learn that around 56% of the respondents have adequate knowledge on online investment. The rest of them either lack adequate knowledge or do not have knowledge of online investment. This data again highlights the need of investors education.

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5) There are still 27% respondents who believe that online method is not that flexible. The company therefore can make efforts to make its services more flexible. Allowing customers with greater flexibility would mean allowing them to change their investment decisions and trading plans.. For example the company can offer trailing stop orders, which are extremely useful for protecting gains and limiting losses. The right degree of flexibility along with correct guidance can help investors build confidence and faith in the company.

6) One of the major disadvantages of online investment is technical problems. The research shows that about 13% cite the slow Internet service provided by the brokers as one of the online trading problems. Hence the company can provide quality services to its clients, which are quick and reliable.

CONCLUSION The onset of online trading has changed the traditional value proposition of trading, allowing online brokers to supply investors with rich, interactive information in real time including market updates, investment research and robust analytics. The result is an integrated trading experience that combines execution with interactive analysis shown by the growth of the online customer community. Through this research I have been able to learn about the online share trading market and the perception of investors towards online investment with respect to variables including Age, Safety, Convenience and Investment decisions. The study clearly states the difference in the pattern of investment among the aged and the youth investors. Majority of the old aged investors in India still prefer offline trading over online due to reasons such as lack of knowledge, lack of awareness of the benefits and misconceptions about the safety of online trading. On the other, the youth investors have preferred online over offline mode due to low transactional costs involved and greater convenience. With the growing participation of youth in such mode of investment, the online business has no doubt become popular and is growing day by day.
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